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Commentary

Does Merged NBCU/Comcast Serve Too Many Masters?

Comcast's imminent takeover of NBC Universal will create the most expansive and challenged corporate arena for embracing trends in mobile commerce, paid content and hyper-local connectivity. The
merger will redefine media in 2011.

It will be telling to see how often Comcast comes down on the side of cable or broadcast versus online streaming, and on the side of content versus
distribution as it wades through the ongoing digital transformation.

Remember: whatever the newly merged Comcast-NBCU does can easily becomes industry dictum. The new media giant's scale and
scope are just that formidable.

As if slogging its way through digital change both as a major cable operator and as a primary content provider wasn't taxing enough, Comcast-NBCU also will be
saddled with post-merger integration. It is a task that has thwarted most mega unions.

The cultural, economic and operational differences between Comcast and NBCU are no less daunting and
potentially as tricky as they were a decade ago for the ill-matched Time Warner and AOL. Comcast-NBCU's dilemma is that the Internet represents very different, often adverse, opportunity and challenge
to cable distributors and content producers.

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Plus, Comcast Chairman and CEO Brian Roberts and COO Steve Burke have managed Comcast like the family franchise business it's always been -- despite
its nearly $60 billion public market cap. GE has historically treated NBC as the engaging Hollywood diversion while systematically operating a global industrial conglomerate. It had the luxury of
keeping at arm's length from show biz; Comcast will have a more intimate relationship. It will consider the best interest of its core cable distribution business or NBCU's content production business,
and only sometimes both.

Can it protect or advance its cable systems from the over-the-top distribution that represents significant revenue-generating options for all content and alternatives to
conventional advertising? While Comcast at the controls creates value in one place of its enlarged empire, it could diminish value elsewhere. The ramifications can reverberate all the way through the
industry's cable system and content segments.

Comcast's Roberts fired the opening salvo of 2011 by announcing at the Consumer Electronics Show the company's intention to stream Xfinity live TV
events and news as well as 3,000 hours of on-demand movies and television programs on the Apple iPad and other tablets.

It is unclear how much of whose content will benefit from the move and
whether NBCU TV programs and Universal films will prevail. The logistics notwithstanding, it's easy to imagine how such arrangements could begin to undermine NBC's co-owned Hulu, which is struggling
to segue from an ad-based to a fee-based streaming content model.

Treating e-tablets as an extension of TV and as the new reigning universal screen assures Comcast cable subscribers access, but
it does not assure NBC's content a protected streaming pathway. Comcast's TV Everywhere interactive content strategy will generate content access fees and shared advertising revenues for NBCU and all
of its rivals.

The conditions sure to accompany the Federal Communication Commission approval of the proposed $30 billion merger will be designed to secure a level playing field for all content
providers and consumers, even as Comcast is locked in heated competition with telcos, Netflix and others. Comcast will need to assure universal access to NBCU content by all of its pay TV and Internet
rivals.

Thus, Comcast's bid for hyper-local revenues will be required to reach beyond its own local franchises as well as those of NBC's owned and affiliated TV stations. And so on.

Clearly,
there are no guarantees that a Comcast-NBCU tie-up will work in a chaotic, developing digital media market. In fact, Comcast must keep NBCU's challenged broadcast business and its competitive cable
and film businesses strong if it wants to make its gradual five-year takeover of NBCU from GE financially viable. The brilliant structure of the deal has Comcast playing with NBCU's funds rather than
risking its own at a time when its cable ecosystem faces its own challenges from over-the-top technology and strained economics.

Whatever compelling value proposition Comcast creates with
e-commerce and social networking with Facebook, online communities such as its own Daily Candy, micro payment providers such as Amazon or Google, and platform providers such as Apple will have to be
similarly extended to all content players -- not just NBCU.

Roberts' marketplace pledge for Comcast to "reinvent how customers interact with their entertainment on TV, online and on mobile
devices" with planned online enhancements and apps do not clearly present a competitive edge for NBCU. Any gains that Comcast makes with interactive advertising and commerce, it will be required to
make on behalf of an entire industry, not just NBCU. The current administration's regulators will surely error on the side of protecting everyone.

That guarded approach will make it difficult for
Comcast to make the most of NBCU's branded content treasure trove. Continuation of exclusive televised Olympics telecasts on cable, broadcast and online would be a sure costly exception.

Who will
Comcast serve first: its 23 million customers, of the 100 million pay TV subscribers in the U.S., the millions of viewers and advertisers of NBC's broadcast and cable networks, or more than 20 million
Apple iPad users?

The answer to that question alone could make this the most tenuous and risky media merger ever.